Event: The company released its report for the third quarter of 2023. The first three quarters of 2023 achieved revenue of about 2,738 billion yuan, an increase of about 1.25% over the previous year; realized net profit of about 650 million yuan, a year-on-year decrease of about 24.33%; and realized net profit after deducting about 604 million yuan, a year-on-year decrease of about 27.75%. Looking at a single quarter, the third quarter of 2023 achieved revenue of about 942 million yuan, a year-on-year decrease of about 6.00%; realized net profit of about 201 million yuan, a year-on-year decrease of about 38.88%; and realized net profit of about 189 million yuan, a year-on-year decrease of about 40.41%. The overall gross margin of products for the first three quarters of 2023 was 64.58%, down 0.45pct year on year.
The growth of highly reliable FPGA products continues to grow. In the first three quarters of 2023, the company's FPGA and other chips, non-volatile memory, security and identification chips, and smart meter chips achieved revenue of 9.10, 8.65, 6.38, 1.89, and 113 million yuan respectively. Among them, the FPGA product business and non-volatile memory have benefited from advanced and reliable technology, continuous expansion of application fields, and steady growth in demand from major customers, and steady growth in revenue growth. The company has maintained a strong competitive advantage in the FPGA business. Currently, it has achieved coverage in various downstream fields, including AI, etc., and can provide 10 million gate level and 100 million gate level FPGAs and PSoC. In terms of software and hardware integration, the company has the full process of independent intellectual property FPGA supporting EDA tool Procise. In terms of new products, the company is promoting a new generation of FPGAs based on the 1xnm FinFET advanced process.
R&D investment drives growth, and downstream applications are gradually becoming more abundant. The company's R&D expenses in the first three quarters of 2023 were about 758 million yuan, an increase of 35% over the previous year. The company continues to invest in R&D to enrich the product range to meet more application areas, while strengthening product development based on diversified supply-side processes. In the future, new product layouts and product iterations will be carried out in FPGA products and other business areas. Continuously improve various business lines to enrich product portfolios and enhance competitiveness.
Profit forecast: We forecast that the company's operating income for the year 23-25 will be 39.40, 50.58, and 6.282 billion yuan, and net profit of 10.88, 14.19, and 1,587 billion yuan, corresponding to EPS of 1.33, 1.74, and 1.94 yuan, corresponding to the current stock price of 36.3, 27.9, 24.9 times PE. As an established IC design enterprise in China, the company has outstanding advantages in various product lines and continues to benefit from accelerated opportunities for domestic substitution. At the same time, it has gained great advantages in the FPGA chip field and maintained an “increase in holdings” rating.
Risk warning: Downstream demand falls short of expectations, market competition intensifies, and new product development falls short of expectations.